The nation’s manufacturing sector expanded at its slowest clip in more than three years in October, a trade group said Wednesday. Economists said housing sector weakness is a big reason for the slowdown.
The Institute for Supply Management, based in Tempe, Ariz., said its manufacturing index registered 51.2 in October, below September’s reading of 52.9.
It was the index’s lowest level since June 2003 and reflected persistently high raw material prices and a decline in new orders, according to data provided by purchasing and supply executives.
Analysts had been expecting a reading of 53.
A reading of 50 or more indicates expansion, while below 50 shows contraction. The October figure represented the 41st consecutive month of growth.
Global Insight industrial economist Tom Runiewicz said the manufacturing sector is likely to experience much slower growth in 2007, perhaps 2.5 percent on an annualized basis, compared with an estimated 5.2 percent in 2006.
Runiewicz’ prediction assumes a further slowdown in housing, which will be bad news for manufacturers of everything from wood products and furniture to carpeting and paint. He is also anticipating a decline in consumer spending for big-ticket items such as cars and appliances, in large part because of stubbornly high energy prices. And he expects less corporate investment in everything from heavy machinery to personal computers.
“We’re starting to see an investment cycle that’s long in the tooth, and slowing down,” Runiewicz.
Tougher times in the manufacturing sector were evident in third-quarter results released by some automakers, auto-parts suppliers and other producers of industrial goods.
The ISM’s new orders index fell to 52.1 in October from 54.2 in September, while the production index slipped to 51.9 from 56.1.
Norbert J. Ore, the ISM’s chair, said the slide in the prices paid index, from 61 in September to 47 in October, was good news, “signaling some relief for buyers for the first time in 15 months.” Ore said the weakening dollar also was a positive sign in that it would help support the export market.
The eight industries that reported growth in October were: apparel, leather and allied products; miscellaneous manufacturing; computer and electronic products; food, beverage and tobacco products; nonmetallic mineral products; furniture and related products; chemical products; and paper products.